Some economists have tipped the government to fast-track the establishment of the diaspora bond and be cautious on borrowing as the World Bank projects a fall in remittances across the globe.
In its Migration and Development Brief 33, the World Bank says remittances to Low and Middle Income Countries (LMICs) are expected to register a decline to $508 billion in 2020 and to $470 billion in 2021.
The Bretton Woods’ institution says remittances are expected to fall by 7.2 percent in 2020 and slightly higher at 7.5 percent in 2021 due to economic disruptions emanating from the Covid-19 pandemic.
The bank says despite the projected decline, the importance of remittances as a source of external financing for LMICs is expected to increase further.
“Remittance flows to LMICs touched record high of $548 billion in 2019, larger than foreign direct investment flows at $534 billion and overseas development assistance at $166 billion,” reads the brief in part.
Malawi is among the low income countries with remittances flowing from America, Europe and within Africa.
Commenting on the projection, Dean of Commerce at the Polytechnic, Betchani Tcheleni, said the projected decline would also be felt by Malawi considering that there are many people living abroad who send money to their relatives in the country.
“We commend the government through the Ministry of Finance who have decided to create a diaspora bond which is very important because instead of people sending remittances in an informal way, we can now begin to channel those resources through the formal way so that we can benefit as a country,” he said.
Economics Association of Malawi (Ecama) president, Lauryn Nyasulu, said the projected drop in remittances is not surprising because every economy is now trying to utilize the resources they have within.
The Covid-19 pandemic has affected most economies across the globe.
Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk.
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